FRANKLIN D. ROOSEVELT
March 12, 1933
I want to talk for a few minutes with the people of the
United States about banking-with the comparatively few
who understand the mechanics of banking but more particularly
with the overwhelming majority who use banks for the making
of deposits and the drawing of checks. I want to tell you
what has been done in the last few days, why it was done,
and what the next steps are going to be. I recognize that
the many proclamations from State capitols and from Washington,
the legislation, the Treasury regulations, etc., couched
for the most part in banking and legal terms, should be
explained for the benefit of the average citizen. I owe
this in particular because of the fortitude and good temper
with which everybody has accepted the inconvenience and
hardships of the banking holiday. I know that when you
understand what we in Washington have been about I shall
continue to have your cooperation as fully as I have had
your sympathy and help during the past week.
First of all, let me state the simple fact that when you
deposit money in a bank the bank does not put the money
into a safe deposit vault. It invests your money in many
different forms of credit-bonds, commercial paper, mortgages
and many other kinds of loans. In other words, the bank
puts your money to work to keep the wheels of industry
and of agriculture turning around. A comparatively small
part of the money you put into the bank is kept in currency-an
amount which in normal times is wholly sufficient to cover
the cash needs of the average citizen In other words, the
total amount of all the currency in the country is only
a small fraction of the total deposits in all of the banks.
What, then, happened during the last few days of February
and the first few days of March? Because of undermined
confidence on the part of the public, there was a general
rush by a large portion of our population to turn bank
deposits into currency or gold-a rush so great that the
soundest banks could not get enough currency to meet the
demand. The reason for this was that on the spur of the
moment it was, of course, impossible to sell perfectly
sound assets of a bank and convert them into cash except
at panic prices far below their real value.
By the afternoon of March 3rd scarcely a bank in the country
was open to do business. Proclamations temporarily closing
them in whole or in part had been issued by the Governors
in almost all the States.
It was then that I issued the proclamation providing for
the nationwide bank holiday, and this was the first step
in the Government's reconstruction of our financial and
The second step was the legislation promptly and patriotically
passed by the Congress confirming my proclamation and broadening
my powers so that it became possible in view of the requirement
of time to extend the holiday and lift the ban of that
holiday gradually. This law also gave authority to develop
a program of rehabilitation of our banking facilities.
I want to tell our citizens in every part of the Nation
that the national Congress- Republicans and Democrats alike-
showed by this action a devotion to public welfare and
a realization of the emergency and the necessity for speed
that it is difficult to match in our history.
The third stage has been the series of regulations permitting
the banks to continue their functions to take care of the
distribution of food and household necessities and the
payment of payrolls.
This bank holiday, while resulting in many cases in great
inconvenience, is affording us the opportunity to supply
the currency necessary to meet the situation. No sound
bank is a dollar worse off than it was when it closed its
doors last Monday. Neither is any bank which may turn out
not to be in a position for immediate opening. The new
law allows the twelve Federal Reserve Banks to issue additional
currency on good assets and thus the banks which reopen
will be able to meet every legitimate call. The new currency
is being sent out lay the Bureau of Engraving and Printing
in large volume to every part of the country. It is sound
currency because it is backed by actual, good assets.
A question you will ask is this: why are all the banks
not to be reopened at the same time? The answer is simple.
Your Government does not intend that the history of the
past few years shall be repeated. We do not want and will
not have another epidemic of bank failures.
As a result, we start tomorrow, Monday, with the opening
of banks in the twelve Federal Reserve Bank cities- those
banks which on first examination by the Treasury have already
been found to be all right. This will be followed on Tuesday
by the resumption of all their functions by banks already
found to be sound in cities where there are recognized
clearing houses. That means about 250 cities of the United
On Wednesday and succeeding days banks in smaller places
all through the country will resume business, subject,
of course, to the Government's physical ability to complete
its survey. It is necessary that the reopening of banks
be extended over a period in order to permit the banks
to make applications for necessary loans, to obtain currency
needed to meet their requirements and to enable the Government
to make common sense checkups.
Let me make it clear to you that if your bank does not
open the first day you are by no means justified in believing
that it will not open. A bank that opens on one of the
subsequent days is in exactly the same status as the bank
that opens tomorrow. I know that many people are worrying
about State banks not members of the Federal Reserve System.
These banks can and will receive assistance from member
banks and from the Reconstruction Finance Corporation.
These State banks are following the same course as the
National banks except that they get their licenses to resume
business from the State authorities, and these authorities
have been asked by the Secretary of the Treasury to permit
their good banks to open up on the same schedule as the
national banks. I am confident that the State Banking Departments
will be as careful as the national Government in the policy
relating to the opening of banks and will follow the same
broad policy. It is possible that when the banks resume
a very few people who have not I recovered from their fear
may again begin withdrawals. Let me make it clear that
the banks will take care of all needs-and it is my belief
that hoarding during the past week has become an exceedingly
unfashionable pastime. It needs no prophet to tell you
that when the people find that they can get their money-that
they can get it when they want it for all legitimate purposes-
the phantom of fear will soon be laid. People will again
be glad to have their money where it will be safely taken
care of and where they can use it conveniently at any time.
I can assure you that it is safer to keep your money in
a reopened bank than under the mattress.
The success of our whole great national program depends,
of course, upon the cooperation of the public-on its intelligent
support and use of a reliable system.
Remember that the essential accomplishment of the new
legislation is that it makes it possible for banks more
readily to convert their assets into cash than was the
case before. More liberal provision has been made for banks
to borrow on these assets at the Reserve Banks and more
liberal provision has also been made for issuing currency
on the security of these good assets. This currency is
not fiat currency. It is issued only on adequate security,
and every good bank has an abundance of such security.
One more point before I close. There will be, of course,
some banks unable to reopen without being reorganized.
The new law allows the Government to assist in making these
reorganizations quickly and effectively and even allows
the Government to subscribe to at least a part of new capital
which may be required. I hope you can see from this elemental
recital of what your Government is doing that there is
nothing complex, or radical, in the process.
We had a bad banking situation. Some of our bankers had
shown themselves either incompetent or dishonest in their
handling of the peoples funds. They had used the money
entrusted to them in speculations and unwise loans. This
was, of course, not true in the vast majority of our banks,
but it was true in enough of them to shock the people for
a time into a sense of insecurity and to put them into
a frame of mind where they did not differentiate, but seemed
to assume that the acts of a comparative few had tainted
them all. It was the Government's job to straighten out
this situation and do it as quickly as possible. And the
job is being performed. I do not promise you that every
bank will be reopened or that individual losses will not
be suffered, but there will be no losses that possibly
could be avoided; and there would have been more and greater
losses had we continued to drift. I can even promise you
salvation for some at least of the sorely pressed banks.
We shall be engaged not merely in reopening sound banks
but in the creation of sound banks through reorganization.
It has been wonderful to me to catch the note of confidence
from all over the country. I can never be sufficiently
grateful to the people for the loyal support they have
given me in their acceptance of the judgment that has dictated
our course, even though all our processes may not have
seemed clear to them.
After all, there is an element in the readjustment of
our financial system more important than currency, more
important than gold, and that is the confidence of the
people. Confidence and courage are the essentials of success
in carrying out our plan. You people must have faith; you
must not be stampeded by rumors or guesses. Let us unite
in banishing fear. We have provided the machinery to restore
our financial system; it is up to you to support and make
It is your problem no less than it is mine. Together we